Answer:
Given that,
Annual nominal interest rate is 7.042% compounded quarterly
To find the effective annual yield.
Explanation:
The formula for calculating effective annual yield (E) is,
[tex]E=(1+\frac{r}{n})^n-1[/tex]
where r is the interest rate, n is the number of compounds per year.
Here, r=7.042 % and n=4
Substitute the values we get,
[tex]E=(1+\frac{7.042}{100\times4})^4-1[/tex][tex]E=(1+0.017605)^4-1[/tex][tex]E=1.07230154-1[/tex][tex]E=0.07230154[/tex][tex]E=0.07230154\approx7.23\%[/tex]
Effective annual yield is 7.23%
